Thursday, August 5, 2010

DUK UNUM CBL PBI BCBP CWH/ISM Service Index/Bought 50 SSBI at 6.3/Sold 50 of 100 DKQ at 21

The ISM services index rose to 54.3% in July from 53.8% registered in June. The consensus estimate was for a decline to 53. Employment crossed above 50, the threshold for expansion, increasing from 49.7% in June to 50.9 in July. New orders increased to 56.7.

Last night, Steven Colbert endorsed Basil Marceaux in the Republican primary for Governor of Tennessee. Republican Gubernatorial Primary Battle Watch '010 - Basil | August 03, 2010 Many of Basil's new and fresh ideas, discussed previously by me in an earlier post, resonated with Steven.

Colbert was really smitten with Basil's strict constructionist's view of the Second Amendment. Where does it say, after all, in that Amendment that "nutcases" can not have guns? In the video clip of Basil shown on the Colbert Report, Basil advocates arming all citizens, even if the Tennessee state government had to buy the firearms. The state would fine anyone who did not own a gun. (an earlier segment on Colbert Nation about Tennessee's governor's race: Republican Gubernatorial Primary Battle Watch '010 - Tennessee)

Colbert also referenced a recent remark by another GOP candidate for Tennessee's Governor, Zach Wamp, formerly a GOP congressman, that voters needed to cast their lots with the GOP in 2010 and 2012, so that states will not have to consider separation from the U.S. (that remark also discussed in Notable & Quotable -

I am reminded of a quote from an article in the The Atlantic magazine to the effect that Democrats may be incompetent but at least they are not crazy. About 1 in 4 members of the GOP believe that Obama is the AntiChrist. Party of Nuts: Poll Shows GOP Thinks Obama is a Muslim

1. Duke Energy (DUK): Except for the 50 shares owned in a satellite taxable account, which will be traded, my remaining Duke shares are regarded as a core electric utility holding. The consensus estimate was for adjusted earnings of 27 cents. Excluding charges, Duke Energy reported an adjusted E.P.S. of 34 cents, up from 26 in the second quarter of 2009. Duke also increased its estimate for 2010 to a range of $1.30 to $1.35 from $1.25 to $1.30. Since starting this blog in October 2008, I have discussed adding Duke shares at $13.56 and $15.79 to the core position. The most recent add was at 16.25 in a satellite account whose primary purpose is to build up a savings account and to use those funds to buy some CDs from an online bank. However, under the current interest rate environment, I am willing to accept anything being offered in terms of CD rates, and the savings account yield is around 1%, which is why I have retreated to a temporary fall back position of buying dividend paying stocks in that account. Once interest rates return to more normal levels, say 4 to 5% (or more) for a 1 year CD, I am likely to opt for that option rather than to continue owning stocks in this account. The Duke shares held in that account will therefore be traded to clip a profit and a few dividend payments. The yield on DUK shares bought at a total cost of $16.25 is close to 6%.

2. BCB Bancorp (BCBP)( own- Regional Bank Stocks basket strategy ): BCB Bancorp, Inc. reported earnings of 20 cents per share for the 2nd quarter, up from 14 cents in the 2nd quarter of 2009. The Board declared the regular quarterly dividend of 12 cents per share. BCB recently completed the acquisition of Pamrapo Bancorp. BCB Community Bank

3. Pitney Bowes (own): Pitney Bowes reported adjusted earning of 48 cents, down from 55 cents in the prior quarter. The consensus estimate was for 57 cents. GAAP earnings were just 30 cents per share. On a GAAP basis the company generated 118 million in cash from operations. The PBI President made the following comment about this disappointing earnings report: "After seeing some early signs of stabilization among our small to mid-sized customer base in the first quarter, we experienced a decline in activity levels in the latter part of the second quarter." Revenues fell 6% and PBI trimmed its full year's guidance to $2.10 to $2.30 from $2.30 to $2.5.

I bought PBI primarily for the dividend. Bought 100 PBI at 21.9 The stock goes ex dividend on 8/11. Pitney Bowes Inc, PBI Stock Quote While I am in no hurry to jettison the shares given the dividend yield, I view this report as insufficient to support a long term hold in the stock, even with no cut in the diviend. Consequently I may sell the position at anytime and would not consider buying any additional shares.

PBI shares were shellacked yesterday, falling 15.87% to close at $21. Maybe that was just a tad too much even for that awful report and guidance. I would hope that the dividend would support the share price at or around the current level. The yield is about 7% at that price, assuming no dividend cut. I would view a dividend raise to be unlikely for the foreseeable future.

4. CBL Properties (CBL)(own Common as LT/own CBLPRC): CBL & Associates reported FFO of 49 cents for the second quarter, and an increase in occupancy to 89.6%. CBL increased its 2010 FFO guidance by 5 cents to a range of $1.87 to $1.90.

5. Unum (own senior bond in TC form only-PJR): After trading junior bonds on several occasions, I finally settled on keeping a Unum senior bond contained in the TC PJR which has done well since my small purchases. bought 50 pjr at $16.72 ADDED TO PJR at $20.70 This TC is currently trading close to its $25 par value. UNUM reported net income of 228.6 million or adjusted earnings of 69 cents per share, beating the consensus estimate by 2 cents. From the viewpoint of a senior bond holder, this is just fine.

6. Commonwealth REIT (own senior bond, CWHN, and common shares): This office REIT changed its name and symbol recently and was formerly known as HRPT Properties. I own 200 shares of this REIT's senior exchange traded bond whose new symbol is CWHN (formerly HRPN). This senior note matures in 2019 at $20 and is currently selling slightly over its par value. Bought 100 HRPN at 19.32 Added 100 HRPN AT 19.15

I also own the common shares, CWH, and I am reinvesting the dividend, currently 50 cents per quarter. CommonWealth REIT Announces Quarterly Common and Preferred Dividends I have traded one of the cumulative equity preferred stocks but no longer have a position, opting instead for shares in the senior bond with a maturity date.

CommonWealth reported a FFO (funds from operation) of 92 cents per diluted share for the Q/E 6/30. The occupancy rate slipped to 86% from 86.6% at the end of the March quarter and 89.1% as of 6/30/2009.

7. MWA (own-Lottery Ticket category): Mueller Water Products, a recently acquired LT, reported net sales of 375.9 million in the quarter and a loss of 3.8 million. Revenues increased 3.5% from the 2009 linked quarter, which is a positive sign considering this firm's results during the recession. MWA fell almost 9% in trading yesterday to close at $3.48.

8. Sold 50 of the 100 DKQ at $21 (see Disclaimer): I sold the 50 shares of this Trust Certificate, containing a senior bond originally issued by May Department Store (now part of Macy's), bought in the ROTH IRA last March at 19.03. So I made some money on the shares plus one semi-annual interest payment. I will keep the shares bought in a taxable account at $15.95. Those 50 shares in the taxable account have a current yield of around 9.8%.

9. Bought 50 Summit State Bank (SSBI) at $6.3 (category 1-Regional Bank Stocks basket strategy)(see Disclaimer): This will be the replacement for BKMU, recently sold after the LB lambasted BKMU's management for their stewardship and the recent dividend cut announced without taking at the same time strong action to improve that bank's awful efficiency ratio. Summit State Bank recently announced its regular quarterly dividend of nine cents and reported net income for the 2nd quarter of $506,000 or 8 cents after the deduction of preferred dividends. This is an extremely small California state bank headquartered in Santa Rosa, CA. I had no idea where that was and looked it up on Google Maps. The city is located north of San Francisco on highway 101.

I counted five branches: two in Santa Rosa, one in Petaluma and one each in Rohnert Park and Healdsburg: Summit State Bank

This bank is so small that it does not file reports with the SEC but with the FDIC.

This is a link to the annual report:

The last quarterly report for the period ending 6/30/2010 showed a net interest margin of 4.56% which is good, but the NPLs to total loans was high at 3.68%. However, NPLs did fall from a more elevated 3.98% of total loans as of 12/31/2009. The efficiency ratio was 60.11. The capital ratios are good. The tier 1 leverage capital ratio was 14.7%; the tier 1 risk-based capital ratio was 18.1%; and the total risk based capital ratio was 19.4%. The bank participated in TARP and received 8.5 million from the government in exchange for preferred stock. _12-19-08.pdf This amount is still shown on the balance sheet, and that is viewed as a negative. I placed the bank in category due to a number of considerations: the bank has not paid paid the government yet; the dividend payout ratio is high; earnings growth is erratic and the P/E is high. If the dividend is maintained at 36 cents annually, the yield at a total cost of $6.3 would be about 5.71%. That is one reason to buy it but the possibility of a dividend cut given the high payout ratio is a reason for restraint. In the last analyst, LB did not hurl as many criticisms at the management of this small bank as it did against BKMU. (the amount invested slightly exceeded the $300 limit for category 1 investments, but LB gave a waiver)

I added another bank to the regional bank basket, and sold another exchange traded bond in the Roth IRA on Wednesday. Both of those transactions will be discussed in the next post.

10. New Windows & a Tax Credit: I had some new windows installed this week which has disrupted the trading operation. It is my understanding that I will be able to claim a $1500 tax credit for that installation. Is there a tax credit for windows, doors, and skylights? (30% of the costs excluding labor up to $5000 which caps the credit at $1500 total for 2009-2010, and no more than a total of $1500 can be claimed no matter how many energy saving items are installed in my principal residence) Federal Tax Credits for Energy Efficiency : ENERGY STAR The windows cost more than $5,000 but $1500 is the maximum credit regardless of how much I go over. Unless extended by Congress, the credit expires at the end of this year. (see Top Ten FAQs : ENERGY STAR-particularly the response to Is the $1,500 tax credit for each product? Each year? Each person?)

To prove his magnanimity to the legends of peon minions and minion peon staff members here at HQ, once again, our Great Leader, Headknocker, will give Staff five days to generate enough realized profits to pay for the windows, using only newly acquired positions. As one would expect, and as another gesture of his generosity that knows no bounds, HK will allow staff to add the tax credit to said profits to achieve this goal.

The Old Geezer was dumbfounded, and just wanted to eat some more ice cream and then take a long nap. OG did not want to disappoint the Great Leader, and not knowing what to do, asked the RB what it would do to accomplish the task set down by the GL. RB replied that it like blondes and wants to make more progress in its secret plan to acquire Canada, all of it.

Some readers objected to renaming Canada "Greater Tennessee" after the acquisition is completed, as that name implied that something could be greater than Tennessee. So, instead, RB has settled on renaming Canada "Northern Tennessee". RB wondered who the Canadians would want as their next Governor. RB thought that some might object to Basil, which could interfere with RB plan to acquire Canada, all of it.

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